The Chinese government has loosened restrictions and embraced regulatory reform to foster a new economic environment. Link for more information In recent years, coinciding with China's entry into the World Trade Organization (WTO), the Chinese government has loosened restrictions and embraced regulatory reform to foster a new economic environment. Pro-investment regulations and an investment system have been put in place to facilitate business transactions and investments, resulting in a flurry of opportunities for foreign investments in its large domestic market, and many recent successful investment exits. The government has also instituted measures for greater transparency and to pursue IP infringement.

In late 2005 China has released new policy guidelines governing venture capital activities that were jointly issued by ten government agencies, and are scheduled to take effect in March 2006 aiming to encourage healthy development of the venture capital industry in China. These guidelines include:

Measure No. 39 was designed to foster homegrown venture capitalists by offering them better tax treatment and easier exit routes.

The China Securities Regulatory Commission ("CSRC") has announced its intention to relax the rules for foreign institutional investors by allowing them to divest their investments after three months instead of one year, and exempting capital gain tax on profits earned by qualified investors.